mar18-30-475158419-Trina Dalziel
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The relentless rise of online retailers has led to deep soul searching among brick-and-mortar retailers to find ways to compete. The traditional methods of competing through convenience, assortment, and pricing are largely ineffective against online retailers who outperform brick-and-mortar retailers in these dimensions. The last arrow in the quiver is to use service as a way to distinguish themselves from online retailers. Yet, research suggests that retailers tend to view store associates as an expense to be controlled rather than as a medium to provide better service for customers.

Practices such as having barebones staff in stores and unstable scheduling (schedules that vary on a day-to-day basis) have flourished in the guise of enabling greater profits for retailers. In study after study for over a decade, operations researchers have found that retailers understaff during peak hours. Increasing staffing, they found, could increase sales and profits. And yet this message on the costs of lean scheduling fell on deaf ears.

Our goal, in a randomized controlled experiment at Gap, was to shift retail associates to more-stable schedules and study the business results. The interdisciplinary team was led by Principal Investigator Joan C. Williams, Co-PI Susan Lambert of the University of Chicago, and Co-PI Saravanan Kesavan of the Kenan-Flagler Business School, University of North Carolina at Chapel Hill.

In retail today, most associates are part time, and part-time schedules typically change every day and every week, often with only three days’ notice of next week’s schedule. This was the way scheduling worked at Gap when we began working with them. But after our eight-month pretest in three stores, Gap made two important changes in all U.S. stores:

  • Eliminating “on-calls.” On-calls are when employees are scheduled to work shifts that can be canceled anytime up until two hours before they are scheduled to begin.
  • Requiring employee schedules to be posted two weeks in advance.

Once the full experiment was launched in November 2015, 28 stores in the San Francisco Bay Area and Chicago were randomly assigned to control and intervention groups. In intervention stores, store managers who chose to participate committed to trying out the two changes above, plus five additional changes:

  • Giving a core team of associates a “soft guarantee” or 20 or more hours a week.
  • Establishing standard start and end times for shifts.
  • Giving more associates a stable core schedule (meaning that associates will have a consistent schedule from week-to-week).
  • Using the mobile app Shift Messenger, in which associates could swap shifts on their own without getting their supervisor’s approval. Managers could also use the app to post additional shifts.
  • Receiving additional staffing during understaffed periods, which were identified based on analysis of store traffic and conversion rate data. These extra hours were not part of the manager’s labor budget and were only given to the stores that were identified as likely to increase their sales by Co-PI Kesavan’s analysis.

More-stable scheduling increased sales and labor productivity

The results were striking. Sales in stores with more stable scheduling increased by 7%, an impressive number in an industry in which companies work hard to achieve increases of 1–2%. Labor productivity increased by 5%, in an industry where productivity grew by only 2.5% per year between 1987 and 2014. Our estimate is that Gap earned $2.9 million as a result of more-stable scheduling during the 35 weeks the experiment was in the field. Given that out-of-pocket expenses were small ($31,200), our data suggest that return on investment was very high. (If stable scheduling were adopted enterprise-wide, transition costs might well entail the costs of upgrading or replacing existing software systems.)

Unlike the typical way of driving sales through increase in traffic, the sales increase from our intervention occurred due to higher conversion rates and basket values made possible through better service from associates. In other words, the sales increase did not occur due to syphoning of traffic and sales from other Gap stores as the stores that had adopted the new policies became attractive to shoppers. So, this augurs well for the rollout of this initiative to the entire chain as a similar increase can be expected as the risk of cannibalization is low.

The conventional wisdom is that lean, unstable scheduling is inevitable in today’s fast-paced, low-profit, brick-and-mortar environment. It isn’t. Our store-level intervention produced a modest shift towards more stable schedules that increased three dimensions of schedule stability: schedules in intervention stores became more consistent and predictable, and employees gained more control over when they worked. Conventional wisdom also suggests that today’s retail environment requires the use of on-calls. Not so: while some store managers expressed initial anxiety about the elimination of on-calls, virtually all managed just fine without them. One manager noted, “I…